Local and county government must find new sources of revenue, despite heavy regulation reveals study

KALAMAZOO, MI — County and local government is the most regulated industry in the entire state, an expert said today at presentation on local government finances sponsored by Southwest Michigan First.

Current state law severely curtails revenue growth at the local level, which has created a need to find new revenue.

“If you look at municipal structures, townships, cities, villages, so forth, most of the structures were developed and designed 150 years ago, before we had electricity, computers, before we had a lot of things,” said Adam Rujan, government technology partner for Plante Moran, a public accounting and business advisory firm. “There’s (sic) a lot of antiquated structures that are built into how we do things as government.”

These structures are severely limiting local units of government ability to raise adequate levels of revenue, according to Rujan.

Thursday morning’s presentation drew more than 80 county and community leaders.

The presentation, which focused on the growing gap between revenues and expenses of local government, also involved Eric Scorsone, an expert in local government finance and intergovernmental cooperation and consolidation for Michigan State University Extension.

Southwest Michigan First held the presentation to reveal the data of a Plante Moran Study it commissioned.

Among the highlights:

• Partially because of the phasing out of the personal property tax, local revenues are dropping to 2005 levels, less than $150 million, and will not return to 2011 levels until 2020.

• On the expense side, costs are expected to rise from $160 million to $180 million in 10 years.

• 53 percent of public spending is on public safety, 21 percent on general government, 6 percent on debt and 4 percent on general government, with the remainder going to other expenses.

The presentation concluded there are two solutions for solving these problems: expanding countywide collaboration and finding new ways to raise revenue.

After the presentation, community leaders in the room were surveyed using clickers to answer what they think should be done to remedy these issues.

• 90 percent of respondents agreed there needs to be more countywide collaboration.

• There was also agreement that the biggest area of potential collaboration was public safety.

• 80 percent agreed there needed to be a change in countywide revenues.

• 36 percent (highest response) supported a dedicated sales tax for specific services as the best potential way to raise revenue.

Rujan said Kalamazoo County has been a hub of innovation for the state of Michigan for decades and he believes it could potentially act as a microcosm for how the rest of the state can address these issues.

“We have a ton of smart folks here,” said Rujan. “If somebody is going to be able to come up with a better mousetrap, I have a lot of confidence in the brainpower in this room.”

Alex Mitchell covers county government and taxes for The Kalamazoo Gazette and MLive Media Group. Contact him at 269-270-8943 or at amitche5@mlive.com. Follow him on Twitter.